Your association’s cash flow needs to be kept on a tight leash. A free-spending group will likely not last long. Hold too tight to the purse strings, though, and you’re probably not offering your membership enough service. There is a balance to strive for when it comes to your group’s money — and that’s where a budget will keep you on a disciplined path.
Step 1 — Give yourself enough time to present the completed budget to the board of directors for their approval. Sufficient time should be allotted for questions and changes after presentation to the board prior to submission for final approval. Usually, three months is enough to prepare and obtain approval of a budget for the next fiscal year.
Step 2 — Review the current year’s budget to actual results to gain an overall understanding of the finances of the association. If no budget was prepared in previous years, then a good starting point would be to use actual income and expense categories that have occurred in the prior fiscal year.
Step 3 — Determine the revenues to be collected from dues, registration fees, contracted fees, etc. Remember to plan for the loss of contracts that have expired and may not be renewed. Additionally, project the anticipated number of members for the coming year and the resulting dues from those members.
Step 4 — Prepare a wish list that encompasses the expenditures required to meet the goals and objectives of the association. At this juncture, it is appropriate to take the “pie in the sky” attitude.
Step 5 — Bring that wish list back to reality and begin to cost out the wish list items, which can be done with the use of incremental budgeting, zero-based budgeting or a combination of the two. Incremental budgeting leans heavily on information contained in the previous year and adding a percentage increment for inflation. Zero-based budgeting requires that each line item be calculated anew. Budget line items would be considered zero unless full justification can be provided for some other figure. Some combination of those two is desirable in the budgeting process.
Step 6 — Compare budgeted revenues to budgeted expenses. The budget must be in balance. Establish priorities and realities and begin the process of eliminating the activities that are not central to the organization’s goals and objectives.
Step 7 — Submit the budget to the board of directors for review and approval. That is more than a mere formality. The board executes its fiduciary responsibility when setting financial limits and boundaries for the staff. The board is also implicitly agreeing to meet the projected revenues and expenditures.
Loading ...
